Is High-frequency Trading Just Another Fad?

In a competitive market where time is money, high-frequency trading is very relevant. This is the method of using the algorithms to execute millions of trades in a fraction of a second. Read bitcoin trader review. Compare this to the conventional scenario where a human trader executes an order. There would definitely be slight delays in the order placed by the human trader against the order placed by an algorithm.

The milliseconds of delay might appear to be a negligible factor to some traders. But the truth is that even the slightest delay can make your calculations invalid. By the time your order has actually placed the value of the asset might already have changed thanks to the millions of bots operating in the market. So is that a good thing or a bad thing? It is actually a bit of both.

When you say that one fine day the bots would be ruling the stock market and that the bots would be placing the orders it might sound like a story out of a science fiction movie. But the truth is that we are nearly there. The bots might not have taken full control but hidden under plain sight a major portion of the orders being executed are those placed by the bots. So this is not a speculative concept anymore. High-frequency trading is not a mere theory anymore. There are many that are now enjoying the fruits of high-frequency trading.

To regulate or not

The real trouble here begins with the fact that high-frequency trading is one such concept that cannot be easily regulated. There is no direct way to understand the type of regulations to impose on it. There are indeed multiple benefits that the governments can reap from this method of trading besides the benefits for the individual investors. So why would governments ban something that can indeed help the economy?

But then there are cases where there are traders or institutions that use flash bids. As a result, they simply place orders to artificially boost the demand, to observe how much the crowd is willing to pay for that asset. Once the sentiments of the masses on that asset are gauged, the bids are canceled. Flash traders can gain valuable insight into the behavior or the traders in this case. But the other traders take a hit from the false hype created and might end up overvaluing the asset.

To prevent such instances having a regulation in place would be the way to go. Legislations would also help ease the grievances of several traders who fret at the concept of high-frequency trading due to the inequality in the timing that these trades cause.

  • High-frequency trades can make the market move
  • They can be used to make quicker and larger profits

There are many more such benefits to using HFT. One thing that we know for sure that this is a trend that is here to stay. And this is one of the trends that have changed the role of humans in the field of trading, forever.

 

 

The Best Types of Mutual Fund Investments

 

Based on the time horizon, availability of funds, and the goals for financial planning, Mutual Funds are the best option to invest your money in a different class of assets like Equity, Debt, Gold and other instruments that come with both flexible and fixed options. Diversifying the portfolio and reducing the risk on single heavy investment is the purpose and essence for which the various groups of mutual funds came into existence. Finding the best out of the plethora of funds available to invest, is purely based on the personal investing goal and style to suit the financial requirements.

Read forex robots reviews here

Exploring the many options available and making a confident decision to invest, should be done only after getting to know the different types of mutual funds from the huge array, and getting to know which funds suit best is important.

Different Types

  • Growth or Equity-Funds– Funds invested in Equity are called Equity Funds that carry the principal objective of capital appreciation over the middle or long-term. They are associated with high risk and are linked to the stock markets, any change in the stock and shares in the markets effects them directly, this type of funds are suited of long-term investment, within the different types of equity finds such as Index based fund, Sectoral specific funds, and diversified funds
  • Diversified Funds-the investment is diversified and spread across many sectors and market capitalization, this type of fund is best suited for investors who want exposure to different sectors across the industry
  • Sector Fund Investing in a particular sector or industry that gives a high rate of return come with a higher risk bracket, their performance has to be continuously monitored for cashing out when the fund is performing well.
  • Index funds-these funds work on the similar pattern as the stock markets, the value of the fund varies in proportion to the benchmarked index, the NAV of the fund will vary according to the changes in the index
  • Fixed Income Funds-they are predominantly based on the debt markets and the funds are invested in corporate bonds, securities, and other money market instruments, ideal for people who are looking for a regular income moreover they are not as risky as the Equity funds
  • Liquid funds– they are investments that have high liquidity, and the time period of staying invested is very short as less as a day very suitable for corporate investors, financial institution, and businesses who are looking for short-term benefits.
  • Exchange traded funds are backed by the physical holding of the commodity as they track the movements of the assets or commodity such as Silver and Gold throughout the day offering high flexibility.

Selecting the best out of the rest is based on the understanding of the fund and clearly understanding the history of the fund performance over a period, and how soon can they get to the good ROI for an investor, based on the several factors that influence the performance of the fund in the short term.

 

Blockchain Technology – 5 Amazing Facts

You might have heard about the Blockchain technology through its well-known benefit known as the cryptocurrency and now, we are here to know more about it through these 5 amazing facts!

  • It’s impregnable!

There is a powerful reason for these digital currencies to be glorified everywhere, which is the impregnable nature of the technology that produced them! Yes, to deal with these digital currencies, the respective entry has to be made into the system aka the Blockchain, which cannot be tampered by anyone, no matter how genius they are. It is because to tamper with an entry means modification of all other entries following it, which is mathematically an impossible process.

  • It’s Transparent

As stated earlier, anybody accessing the technology is expected to make their entry into the system, which means, all details are available to the concerned. A bonus news on this, the anonymous founder Satoshi Nakamoto mined the first-ever Block 0 in 2009, which contains the message “The Times 03/Jan/2009 Chancellor on brink of the second bailout for banks”. These transparent natures of the system, negates the success of the scammers and therefore, no wonder the experts highly favor the technology!

  • It’s not limited

The world got to know the powerful nature of the technology only through the cryptocurrency (Bitcoin) and it is only natural to limit the benefits of the technology to the digital currencies. But, fortunately, the technology’s benefits are unlimited such as running the smart contracts in the case of Ethereum, curbing the fraudulent electoral voting activities and so on that can offer great benefits to the humankind and their world, indisputably!

  • It’s growing very quickly

Although only 0.5% of the world’s population is using this technology, it is expected to grow massively to reach a market worth of $20 billion by 2024. The growth of its pioneer cryptocurrency Bitcoins serves as a proof to this statement, where more than 8 million Bitcoin accounts are in use today, astonishingly! Yes, since its inception in the year 2010, the Bitcoins were keeping on growing more than 100% per year to reach this at present favorable situation and therefore, understand how the favorable growth of its source aka the Blockchain technology could be in the future with all those varying benefits identified?

  • It’s decentralized yet, centralized

Well, don’t be confused before reading what we are about to say. In a ‘Public Blockchain’ all the users are allowed the access and therefore, it is decentralized in nature. Whereas in a ‘Private Blockchain’, the access is restricted to a group of members, and therefore, its ways are centralized!

Fund Management-A Broader Perspective

We live in an era where jobs are taken up not only as a means of the live hood, but also to satiate the passion to do things in a certain way. An exciting option to win over clients to manage their huge corpus funds interests many who have a keen interest in the financial service industry. The asset management is an industry which is anticipated to grow bigger, with trusted advisors the funds are invested in a different mix of investment tools, this is one industry which has scaled back rapidly after the financial crisis with more than a few trillion and an average growth of 6 %.

Types of funds

Broadly analyzing there are two types of funds:

Passive – they monitor the performance of large indices, where the client’s money is invested in the index tracker and then gets allocated to a different array of the portfolio in form of:

  • stock
  • bonds
  • sovereign wealth fund
  • ETF’s
  • Large pension funds among the other basket of fund allocations

The advantage of for the investors is that the fees charges are low and since the investment portfolio has more into long-term debt funds, the risk is minimal, though the turn over may not be very high. The indices like S& P 500 are tracked and then the funds are invested to get a good growth, on a consistent basis and advise the clients on the performances periodically by the fund managers. Exchange traded funds are tradable securities the prices of which fluctuate as the stocks in the stock markets. This type of market is more driven by the external factors and directly depends on the market performances.

Active- this is based more of how the equity markets perform, the Dow Jones industrial average is considered, it is more action-driven and highly volatile equity-based markets, the bond markets are also touched upon, here the investors are more interested in the brand and big players in the markets. The fees charged are considerably higher by the fund managers as the risk exposure is high and the switching if the funds are more frequent in this market.

The different investment terms and tenure are ways to high light how secure the fund is if invested in a bottom up or top down asset performing in the industry. Depending on the performance of the funds in certain sectors like power, manufacturing comes in the top-down category, while the rest including service and enabled services industry come in the bottom down a basket of investment options for clients based on how small or big their portfolio and amount invested in the markets.

 

 

 

 

Fighting The Tough Trades With Arbitrage

Meeting the odds and still being an active trader is today’s style! The trading market is one with full of adventures every day. One thing which is very sure of in this market is changing. So every day could be a fresh beginning and hence it needs a lot of smartness to be an active trader, by keeping the risk factors in mind. The risk management of the trading sector is a challenging aspect which has been worked out by the members of this sector.

Such continuous analysis has given the option of risk management by means of hedging and arbitraging which follow different theories and help in better working of the trades.Each of these is capable in their own way to fetch long-term profits from trading as an art. There are many types of arbitrage functions that could be used according to each situation in the share market. They are detailed further.

True arbitrage:

This is a type which is useful from the point of view of market makers. Market makers work on the factors like far more trading capital, more skilled in general, faster computers, more complex software system etc.

With such unique features, it is difficult for the people retail trading to use the pure arbitrage for managing the risk of loss, but there could be another form of arbitrage to suit the needs of retail traders.

Risk Arbitrage:

This is unlike true arbitrage, as the name suggests it is coined with the aspect of risk. This deals with addressing risk and particular function levels. One example can be at merger and acquisition level. By this method, a company which has been undervalued is identified and takeover by a well-performing company is initiated so that the undervalued one begins to develop better. This will benefit all those who are in the process.

Another type of the risk arbitrage can be the liquidation arbitrage which is by finding the liquidation value of the assets of a company. For example, the current value of a share is less than its book value the company can choose the liquidation arbitrage. So this will prove to be a profitable approach.

Yet another model is the Pairs Trading in which is a less common method of arbitrage. It is also referred to as relative-value arbitrage. The method goes into finding pairs of companies with a long-standing good trading history and correlating between them. It is quite challenging to find such pairs easily and hence this method could be least preferred.

Valuating the possibilities of risk and preventing loss from them can be possible with careful analysis of the arbitrage at different functional levels of the trading market.

 

The Need For Fund Management

Before getting into elaborating and explaining the topic, it is important and becomes essential to primarily understand fund management. Let`s now take a look at what this fund management is all about and how this is done. Fund management is nothing but the management of cash flows of a financial company. Now cash flows happen in any type of company and organization and even at our homes. So it is important to have this concept of fund management in places wherever there are financial transactions. This process of managing funds is mainly by the fund manager who is assigned and authorized to have a look and probe at all the financial transactions and he is the only authoritative person to question the company regarding the inflow and outflow of cash.

Why fund management?

Fund management is very important in all places involving inflow and outflow of cash because this is the indicator of a company`s performance and it would detail the financial performance of a company. As all of us know, a company needs to have a proper and conscious eye on what is being spent for the good and growth of the company and at the same time pay attention to what comes in. In fact, a company should take to concentrate more on what it gets in return in the name of incomes and should base all its expense on this for this would be ideal for its growth and it would be easy for it to have a track on what is being earned and what is being spent. This is the main reason for a company to note the cash inflows and cash outflows which is nothing but fund management.

Is fund management important everywhere?

Fund management is something important for all. It is not just the companies and organizations that enjoy incomes and experience expenses but this happens on a daily basis at all such situations wherever there is money getting transacted. Yes, even at homes we unknowingly follow fund management and it is important even here which helps in having an eye on what comes in and what goes out. So in these lines, if we see and discuss, this is a concept that is important and happens everywhere wherever there is cash and in such places, it becomes important for people handling it to manage them appropriately to have the right numbers at the end of the calculations.

So if you are dealing with cash inflows and outflows and if this is a constant and regular happening, understand that you have already become an efficient fund manager of your concern irrespective of whether it is big or small.

Business valuation for startups

Valuating a startup might be very different from evaluating other businesses. An established business would have a lot of data to analyze making it easy to understand the performance of the business.

But evaluating a startup with very little background data to study is going to be more complicated. As an investor, if you plan to invest in a startup remember that it is not going to be a straightforward process.

Startups might be in need of reliable investors at several points. Investors who invest in new ventures should be able to master the art of business valuation so as to ensure accurate attention to details.

To know where the business would stand in the market, you should know where it stands at present

Startup valuation would give you the real worth of the business at present. This would be an indication of the value attainable in the future. As an investor, you would thus be able to get an idea of where you are investing your capital.

The market valuation is a great first step to understand the position of the business with respect to the others in the same segment. After taking into account the various comparables and projections you would then be able to predict the worth in the long run.

Market multiple approaches

For the above conclusion to be drawn market valuation is what is chosen. Market multiple approaches to business valuation are something that a lot of venture capitalists prefer. Though this is not a very accurate method it gives a closer picture of what the worth would be by comparing the case of similar acquisitions that happened in the recent past.

Such assumptions would have to be taken because there is no proven method to accurately predict a startup’s growth and performance.

The real difference

When the earnings and the account profits of the business are already available, as with established businesses; valuation is much simpler. For startups, there is a lot of inherent inconsistency. Till the cash flow stabilizes and a pattern develops there are different parameters to study to understand the worth of a startup.

The supply-demand consideration is a good place to start. Even if there is no stability established if there is a huge demand for the products or services offered by the startups and if it stands out in the competition then it surely would have a bright potential for growth.

 

Investors take on Working Capital of the Business

Investors are constantly looking at how well the business can be run with a keen eye on the cash conversion cycle of the enterprise where they have a financial interest in.

Their comprehensive view of the balance sheet has 3 main metrics: the assets performance, the manner in which the structure of Capital is assembled and the adequate working capital of the business. The efficiency in managing the above financial standpoints, it is important for the business to run its operational cycle smoothly.

Investors View

As they say, Revenue is Vanity, profit for Sanity and Cash is the reality which perpetuates the fact on how well the conversion of cash equivalents’ are done in the business during the short span of time necessitated for funding the short-term requirements in the enterprise. Investors look in the:

  • a good analysis of the healthy working capital ratios which are mostly the improvement of the cash flow cycle in the business including how well the conversion period is
  • accelerating the cash inflows in the business which takes on the customer’s purchase decision, credit decisions, payment terms, the collection period and improvising the debt collection, payment, and deposit of funds
  • the credit policy and checking where and how the policy works effectively in the business along with the Credit insurance
  • the forecasting of the cash inflows, the collection period, the sales ratio including the aging schedule, projected outgoings from the business, combined together to understand the incoming and outgoing projections together gives a good cash flow movement understanding
  • the surplus and shortage forecasting and asset sales will determine the projection of how well the cash inflow and outflow is happening in the business however large or small it is
  • Study of the ratio’s in financial terms gives the overall picture of how the company accounts are used to understand and bring out the quick view of the operating cycle of the business.

As investors judge on how well the short-term assets are managed in the business to generate the funds, to inject in the business expansion or special projects the liquidity should be determined in the correct way without having to circle around the numbers for long, as cash is King, it works on like the sixth sense for the business, without which all the five senses are in vain. Managing the collections of the business with priority on the collection method employed and the terms help the overall process of managing the business efficiently.

How Is A Forex Broker Paid?

If you are new to the Forex market then there is one feature that will invariably hold your interest and make you want to invest in it and that is the promise of no exchange fees. For a trader who has just joined the bandwagon and is yet to settle himself, it is a great piece of information to be able to start trading without spending money on transactions. However, you might also wonder how your broker will be paid. If you are not paying the money, who is?

The forms of commission

Forex brokers make use of three forms of commissions. The first form of the commission is known as a fixed spread, the second form is known as a variable spread and the third form of commission happens to be a certain percentage of the entire spread. You might instantly take a liking to the fixed spread because it seems doable but before you choose this option, do understand that there are other factors involved.

Ask Price and Bid Price

The difference between the bid price and the asking price is what is popularly known as the spread. It is the difference in price between what the market maker might pay you because you have bought the currency and the price at which he will sell the currency to you. This spread is the broker’s commission. A broker could charge a commission as well as a spread, depending upon the type of trade.

Variable Spread

If the spread is variable then it will depend on the movement of the market. Sudden market movements such as changing interest rates etc could change the spread as well. This could work in your favor or could go against you, depending on what your position is. If the market conditions are volatile, you might end up paying way more than what you would have if your broker had a fixed variable spread payment method.

Commission based payments

If you have a broker who is being paid on the basis of commission then the size of the commission will depend on the things that the broker offers. If he is offering you good services then paying that extra bit of commission is worth the trouble.

Whatever the mode of payment, you must ensure that the broker you have hired has been in the business for a long time and has enough experience in the Forex market. You should also take a note of the experience that he might have had in terms of managing a firm.